Tuesday, July 28, 2009

The Chinese aren't that confident about the current administration. No kidding.

Obama dispatched his top economic officials - Treasury Secretary Timothy Geithner, National Economic Council Director Lawrence Summers, White House budget director Peter Orszag and Federal Reserve Chairman Ben Bernanke - to try to reassure China that the U.S. will not let deficits or inflation jeopardize the value of Chinese investments.

U.S. briefers said the president's team told the Chinese that the United States was committed to making sure the economic and monetary stimulus being used to fight the recession did not fuel inflation.

I'm glad they're looking out for the Chinese and aren't going to let deficits or inflation jeopordize their investments.

This made me LOL:

U.S. officials told reporters that the U.S. side stressed to the Chinese that the United States has a plan to bring the deficit down once the economic crisis has been resolved. They said Bernanke discussed the Fed's exit strategy from the central bank's current period of extraordinary monetary easing, emphasizing that the Fed was being careful to guard against future inflation.

What plan to bring down the deficit!? I haven't heard about that. It must be some secret plan that they don't want to expose to the little people.

I love the expression "extraordinary monetary easing", as in "Bend over, here comes some more extraordinary monetary easing."

Why don't they just say "We're inflating the currency"? That way everyone knows what you are doing as in "Bend over, they're inflating the currency again." I guess I answered my own question there.

From the article:

The Chinese, who have the largest foreign holdings of U.S. Treasury debt at $801.5 billion, have been expressing worries that soaring deficits could spark inflation or a sudden drop in the value of the dollar, thus jeopardizing their investments.

The Chinese aren't the only ones worried about inflation or a sudden drop in the value of the dollar. The President of the United States may not be worried about that but many people in the United States are worried.

More from the article:

"We sincerely hope the U.S. fiscal deficit will be reduced, year after year," Assistant Finance Minister Zhu Guangyao told reporters after the Monday talks had ended.

Lots of luck with that. I sincerely hope the U.S. deficit will be reduced, but it's not going down any time soon.

Raising taxes can make the situation worse by being a negative incentive to invest or work harder. Lowering taxes will usually help more.

Another thing hussein does that hurts the economy is having the government change the terms of contracts between entities. Nobody wants to invest when they don't know how the terms of the investment may change in the future.